Last updated December 2010
Author:
Joshua Wilde
Abstract:
The extent to which fixed factors of production, such as land, constrain per capita income growth has historically
been a widely discussed topic in economics since Malthus (1798). Whether fixed factors limit growth critically
depends on two variables: the substitutability of fixed factors in production, and the extent to which innovation will
be biased toward land-saving technologies. However, there are few estimates of either variable, and most models
assume this elasticity of substitution is unity out of convenience. This paper attempts to fill that gap in the literature.
Using the timing of plague epidemics as an instrument for labor supply, this paper estimates the elasticity of substitution
between fixed factors and nonfixed factors in preindustrial England. I find that the elasticity of substitution
between land and other factors during this period was significantly less than one, which implies that the Malthusian
effects of population on income were stronger than current models predict. In addition, I am able to estimate the
direction and magnitude of induced innovation. I find evidence that denser populations—and hence less availability
of land—induced innovation toward land-saving technologies. Specifically, I find that a doubling of population density
in England from its year-1500 level increases the difference in the growth rates of land-enhancing and laborenhancing
productivity by 0.22 percent per year.
Contact Information:
Joshua Wilde,
mailto:joshua_wilde@brown.edu, Brown University